Digging is underway at Shree Minerals' Tarkine mine in Tasmania's far north-west.

The ribbon has been cut at the site of the $20 million open cut iron ore mine at Nelson Bay River.

In its initial stage, the site is expected to produce 400,000 tonnes of shipment-ready iron ore annually for the next two to three years.

It has been three months since the Commonwealth granted a second approval for the project after the Federal Court ruled invalid the initial go ahead by then Environment Minister Tony Burke.

Strict conditions were imposed in an effort to protect several endangered species in the area.

Chairman of the West Australian company, Sanjay Loyalka, says its environmental practices go well beyond simple compliance.

The State Government expects 120 jobs will eventually be created from the project.